Matt Dickinson

Housebuilder Bovis Homes revealed the impact of the credit crunch yesterday with an 84% slump in half-year profits and plummeting house sales.

Bovis said pre-tax profits for the six months to June came in at £9.5m, down from £58.4m for the previous year, after its "toughest period of trading" as a public company.

House sales dived 32% to 851 during the six months, with average selling prices slumping 12% to £167,600.

The group warned the market woes - which it blamed on a mortgage famine and higher borrowing costs - would continue for the "foreseeable future". Sales volumes have already deteriorated since the half year and stood 39% lower at August 22.

In a bid to cope with the downturn, the firm has slashed staff numbers by 40% since the start of the year - a move Bovis said will save 20%, or £10m, of overheads per year.

Bovis also slashed its interim dividend by more than 70% as previously indicated, paying out 5p compared to 17.5p last year.

Recent data from the Bank of England showed that mortgage approvals in June were down 70% from a year ago.

Of Bovis's 851 house sales during the six months, 624 were to private house buyers - down 43% on a year ago. The remainder were sales of social housing schemes, which staged an improvement of 38%.

Analyst Jon Bell at Shore Capital said he expected further declines in private home sales as the effect of the lower mortgage availability filtered through the market.

He said: "We believe property transactions lag mortgage approvals by between three to six months and on this basis, it would appear reasonable to expect private completions in the second half of the year to show further declines."

Bovis warned that due to the current market uncertainties it was committed to competitive pricing in order to "achieve volume delivery".

It added: "Given current sentiment, this is likely to further reduce private sales prices and profit margins achievable on incremental reservations over the remainder of 2008."

Bovis has shut its eastern regional office in Cambridgeshire as part of 400 job losses this year. It has also merged the key functions of its northern and central regions.

But Bovis allayed fears it would have to write down the value of its land bank, which it said was of high quality and had strategic benefits.

The company is the second major UK housebuilder to report interims this month, after Persimmon which last week unveiled a 64% profits slump.